Lazard sees more oil, alternative energy deals
By Joseph A. Giannone
NEW YORK, Jan 8 (Reuters) - Investment bank Lazard Ltd (LAZ.N) expects to see more deals among oil and alternative energy companies, fueled by soaring demand and the need to replace shrinking natural resources.
Lazard said on Monday it added John Rutherford, a veteran energy banker from Simmons & Co to run its energy M&A practice in North America. Rutherford joins Bruce Bilger, a Vinson & Elkins LLP attorney, who was hired in November to become chairman and head of global energy investment banking.
Lazard recently launched its alternative energy initiative, bringing bankers from a number of different sectors together as "a virtual group." These moves are part of a broader expansion of its energy banking team to capture an expected increase in M&A and capital raising.
"We want to be as well-positioned as we can to capture all the challenges and opportunities that are going to come from alternative energy developments, global challenges around resource levels and things of that nature," George Bilicic, global head of power and energy at Lazard, said in an interview.
Energy companies have been on a tear for the past several years, as soaring global demand for crude oil, natural gas and refined fuels push commodity prices higher.
Bilicic said deal activity will remain strong in part because oil producer stocks do not always keep pace with the value of their underlying assets. That creates opportunities for bargains, even if a stock's price-to-earnings multiple is historically high.
Producers also need to replenish the barrels they have pumped out of the ground and meet growing demand from developed and emerging economies. That will spur takeovers if companies choose to buy rather than develop new reserves.
Yet even as crude oil reaches levels around $100 and profits soar, Bilicic said some producers will look to diversify by acquiring alternative energy companies -- such as ethanol, biofuel and synthetic fuel producers.
Lazard is taking an unusual approach, creating a virtual alternative energy team comprised of bankers from its industrial, energy, utilities and agriculture areas. Over time, he added, more alternative energy companies will grow from start-ups to profitable, mainstream companies.
"It's not crazy to believe some of the classic oil companies will become more active in alternative energy through M&A," Bilicic said. "Also there will be more M&A activity over the next several years in terms of horizontal activity and in vertical integration, as generators of alternative energy look to be more integrated to the customer."
Although the vast majority of its revenue comes from advising companies such as TXU and Gaz de France on mergers and acquisitions, Lazard also will pursue work helping alternative energy firms raise capital, he said.
Last year, Lazard advised on primary and secondary stock offerings for Energy Solutions Inc (ES.N), First Solar Inc (FSLR.O), FuelCell Energy Inc (FCEL.O) and Canadian Natural Resources Ltd (CNQ.TO). The bank also was co-manager for 12 energy company debt offerings.
"If I were a 23-year old kid, there's no question I would go into this area," he said. "It's just absolutely dynamic." (Reporting by Joseph A. Giannone; Editing by Andre Grenon)
